At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Trinity Industries, Inc. (NYSE:TRN) ready to rally soon? Hedge funds are buying. The number of bullish hedge fund bets rose by 1 recently. Our calculations also showed that trn isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to review the latest hedge fund action encompassing Trinity Industries, Inc. (NYSE:TRN).
Hedge fund activity in Trinity Industries, Inc. (NYSE:TRN)
At Q1's end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TRN over the last 15 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Trinity Industries, Inc. (NYSE:TRN) was held by ValueAct Capital, which reported holding $475.9 million worth of stock at the end of March. It was followed by Omega Advisors with a $41.8 million position. Other investors bullish on the company included Cardinal Capital, D E Shaw, and Royce & Associates.
As one would reasonably expect, specific money managers were leading the bulls' herd. StackLine Partners, managed by Brian Gootzeit and Andrew Frank, established the most valuable position in Trinity Industries, Inc. (NYSE:TRN). StackLine Partners had $13.5 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $10.9 million investment in the stock during the quarter. The other funds with brand new TRN positions are Noam Gottesman's GLG Partners, Benjamin A. Smith's Laurion Capital Management, and Matthew Hulsizer's PEAK6 Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Trinity Industries, Inc. (NYSE:TRN) but similarly valued. These stocks are John Bean Technologies Corporation (NYSE:JBT), Cloudera, Inc. (NYSE:CLDR), Strategic Education, Inc. (NASDAQ:STRA), and Old National Bancorp (NASDAQ:ONB). This group of stocks' market valuations are similar to TRN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JBT,9,89833,0 CLDR,32,344581,6 STRA,13,214977,1 ONB,9,34803,2 Average,15.75,171049,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $700 million in TRN's case. Cloudera, Inc. (NYSE:CLDR) is the most popular stock in this table. On the other hand John Bean Technologies Corporation (NYSE:JBT) is the least popular one with only 9 bullish hedge fund positions. Trinity Industries, Inc. (NYSE:TRN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately TRN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TRN were disappointed as the stock returned -8.7% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.